Diversity and trustee boards has been on the agenda for
quite some time. The pension industry
may not feel as though it is at the cutting edge of society, but it has recognised that diverse Trustee
Boards make for more informed decision making and stronger governance.
All Boards need to be more diverse, but we need to ask what
we mean by diversity and where sometimes it is background or approach that adds
far more than the legislative focus on gender .
Makes a Diverse Board?
There are many aspects to diversity but at a time when even
finding new trustees for legacy pension schemes is a major challenge, is
diversity the cherry on top of the icing when we really need to concentrate on
With an increasing trend towards Sole Trustee appointments, does this mean
that as an industry we now think don’t worry about diverse opinions and skills
we should just leave it to “the professionals”?
Whatever the composition of the Trustee Board, it is the
diversity of skills and perspectives that adds balance. Many trustees come from
finance backgrounds, but financial skills aren’t a prerequisite of good
governance and not every trustee needs to a specialist in compound interest and
statistics. In the words of David Fairs at the AMNT conference in March 2019, –
a good trustee needs more than the ability to tot up a spreadsheet.
You Need From a Trustee?
You need a trustee team that can understand the complexities
of areas such as investments but equally you need trustees that can challenge,
influence and negotiate – softer skills that are often overlooked in such a
technical area. Sometimes being the
person who isn’t embarrassed about asking the obvious questions adds the most
value. Being able to challenge
constructively has been shown to be one of the key components for effective
investment decision making.
Understanding the perspective of non-pension people is vital
for good communication. With the growth
in defined contribution schemes and the increasing number of pension savers
under 30, it is surely time that we see the Master Trusts actively seeking to
change the demographics of their trustee boards. There is a great opportunity
for them to lead the way in reaching out to younger trustees with the resources
available for training and structured development.
Trusteeship delivers real opportunities for the development
of transferable skills. Team building, technical challenges and learning the
art of constructive debate are useful in many different roles, so the
opportunity for development for younger members of a trustee team are
Unlike the board of a business, a number of trustee board
members may have less control as to the composition of their board. Here it is
the nomination and selection process for member-nominated trustees that can be
addressed and they can actively look to identify candidates that are best
suited to the role of a trustee. Although as we know from other walks of life,
sometimes you need to see someone in the role to know you can do it. Moving on
from the traditional trustee board image needs positive reinforcement to
disrupt the status quo.
Targeting Younger Trustees
For defined contribution pension schemes, younger trustees
should be actively targeted. To
encourage people to engage with their retirement savings, promoting good, positive information and helping their
peers to understand why pension saving
is important can only encourage
To attract a wider group of potential
trustees, understanding the skills your board needs, undertaking
self-assessments and putting in place a framework that means the members value the role, will generate
greater engagement, meaning more diverse applicants and therefore more visible representation.
Older legacy defined benefit schemes face different
challenges not least how Sole trusteeship can deliver diversity of opinion
and how we build effective challenge to
deliver better informed decisions. A
professional trustee doesn’t have all the answers and the Regulator is right to
challenge the industry to prove how it
meets the questions raised in recent consultations.
For more information about
trustees, pension schemes
and other independent trustee services get in touch with
our team today.